How Elon Musk Thinks: First Principles Problem Solving

 📧 Weekly First Principles frameworks: maaponte.substack.com 

Most people think by analogy: "This is like that, so I'll do what worked before." 

But when context changes, analogy fails. And you don't even realize it's failing. 

First Principles Thinking is different. Instead of asking "What's this similar to?" you ask "What's actually true here?" You strip away assumptions, get to fundamental truths, and rebuild from logic. 

This is how Elon Musk proved electric cars could be affordable. This is how great scientists solve impossible problems. And you can learn it too. 

In this episode, I break down the exact process for First Principles Thinking—and show you how I used it to cut school suspensions by 60% in one year. 

Real story: Early in my finance career, an investor stopped my pitch and asked: "Why does the stock market exist?" I didn't know. I'd been trained on HOW markets work, not WHY they exist. He walked me through first principles—and it changed my entire approach to investing.
You'll learn:
• Why markets exist and what that means for investing
• First principles versus thinking by analogy
• Foundational truths in physics, math, behavior, and organizations
• Uncovering hidden assumptions in education structures
• Rebuilding methods around exposure, practice, and feedback
• Applying principles to hiring, training budgets, and staff conflict
• Common traps and counters that block clear thinking
• Practical exercises: five whys, start from zero, question constraints
• A restorative approach to discipline that lowers suspensions
• Simple prompts to apply the mindset this week

 CRITICAL EXAMPLE: Traditional discipline assumption = "students need punishment to learn." First principle = "behavior is communication of unmet needs." Rebuilt discipline system around connection, competence, autonomy, safety instead of punishment. Suspensions dropped 60% because we stopped solving the wrong problem. 

Most constraints aren't real—they're assumed. "We can't because of budget/regulations/time" usually means "we've assumed we can't." 

Strip it down. Question everything. Rebuild from fundamentals. 

If you want to go deeper on first principles thinking, if you want frameworks for identifying hidden assumptions and rebuilding from fundamentals, I write about this every week in my Substack. maaponte.substack.com 

 #FirstPrinciples #FirstPrinciplesThinking #CriticalThinking #ProblemSolving #ElonMusk #Innovation #Leadership #DecisionMaking #StrategicThinking #SystemsThinking 

Chapters

• 0:00 The Investor’s Question: Why Markets
• 2:24 Defining First Principles Thinking
• 4:20 Principles Versus Analogy
• 7:06 What Counts As A First Principle
• 9:15 Exposing Hidden Assumptions In Education
• 12:08 Rebuilding Methods From Fundamentals
• 14:14 Hiring, Budget, And Conflict Decisions
• 17:18 Common Traps And Counters
• 19:31 Exercises To Practice The Skill

Transcript

SPEAKER_00: 0:00

I'm sitting across from a potential investor. This is early in my finance career. Now, mind you, I'm about off the top of my head, around 23 years old. I'm still learning. He's a successful entrepreneur. So sold his company for eight figures. Now he's deciding what to do with his money. I start my pitch based on your risk tolerance and timeline. I recommend a diversified portfolio with 60% equity, 30% bonds, 10% alternate investments, all that fun stuff. But he holds up his hand, stops me in mid-sentence. He says something along the lines of this Mike, before we talk about what to invest in, I need you to explain something to me. And I confused, say, sure, what? Why does the stock market exist? And I'm confused. Well, it's where people buy and sell shares. And he's like, I know that, but why does it exist? What problem was someone trying to solve when they created it? And I honestly didn't know. I've been trained on how markets work, not why they exist. He leans back and says, okay, let me help you. Imagine you own a business, you want to expand, build a new factory, hire more people, whatever, but you need money. What are your options? You could get a loan from a bank. And he replied, right. And the problem with that? And I replied, obviously, you have to pay it back with interest. And if the business fails, you steal the money. Which he said, Exactly. So what's another option? I think you could find someone to invest in your business, give them ownership in exchange for capital. Which he says, good, but now you have a new problem. That investor can't get their money back unless you sell the whole company or you buy them out. Their money is locked up. So what do you need? That's when I suddenly see it. You need a place where the investor can sell their ownership to someone else. A market. He smiles. There it is. The stock market exists because businesses need capital to grow. Investors need liquidity to reduce risk, and both parties need a mechanism to exchange ownership. Everything else, the ticker symbols, the trading algorithms, the financial news, is built on top of that. He looked at me. Now, knowing why the market exists, what should we actually invest in? And suddenly my pitch changed. Because I wasn't recommending products. I was I was solving the actual problem. You need to deploy capital where it will grow while maintaining enough liquidity to access it if the circumstances change. That's first principles thinking. Strip away everything you've been told. Strip away the jargon, strip away the assumptions. Get down to the fundamental truth. Then rebuild from there. This is Thinking to Think, the podcast about making better decisions in a world designed to make you think worse. I'm Mike Aponte, also known as M.A. Aponte, former NYPD officer, former Merrill Lynch Wealth Manager, former trained actor, and current executive director to a school in Florida. And today we're talking about first principles thinking, how to strip a problem down to a fundamental truth and rebuild from logic, not assumptions. Most people think by analogy. The situation is like that situation. So I'll do what worked before. That's not bad thinking. That's it's efficient. It's how your brain conserves energy. But analogy-based thinking has a fatal flaw. It only works when the contexts are actually similar. When the context changes, when the underlying conditions are different, analogy fails. And you don't even realize it's failing because the situation looks similar on the surface. First principles thinking is different. Instead of asking what this is similar to, you ask what's actually true here. Instead of reasoning by analogy, you reason from fundamental truths. Here's the difference. Thinking by analogy. We've always done it this way, so we should keep doing it this way. First principles thinking. Why did we start doing it this way? What problem were we solving? Does that problem still exist? Is there a better solution now? Thinking by analogy, electric cars are too expensive because batteries are expensive. First principles thinking. What is a battery fundamentally? Its materials, lithium, cobalt, nickel. What do those materials cost on the open market? Why do assemble batteries cost 10 times more than the raw materials? Can we manufacture them differently? That's what Elon Musk did. Everyone said electric cars would always be expensive. He stripped it down to first principles and proved them wrong. Most people don't do this. It's hard. It requires questioning assumptions you didn't even know you had. But when you're when you learn first principles thinking, you can solve problems other people think are impossible. So what are first principles? A first principle is a foundational truth that cannot be deducted from anything. Example of first principles, in physics, energy cannot be created or destroyed, only transformed. Objects in motion stay in motion unless acted upon by force. In mathematics, one plus one equals two. A straight line is the shortest distance between two points. In human behavior, people act in their perceived self-interest. Pain and pleasure drive behavior. In organizations, organizations exist to solve problems. People perform better when they understand why their work matters. These aren't opinions, they're fundamental truths. Everything else is built on top of them. The first principles process, step one, identify your current assumptions. Most of the time you don't even know you're making assumptions. They're invisible. Example from education, students need to be in school eight hours a day, five days a week. Is that a first principle or is that an assumption based on historical context? When public schools were created, they were designed around agricultural schedules. Kids needed summers off to help with the harvest. And the eight hour days? That mirrors factory shifts because schools were preparing kids for factory work. Neither of those contexts exists anymore, but the structure remains. That's an assumption masquerading as truths. Step two, break the problem down to fundamental truths. Ask, what do we know is actually true here? Education example, what's the first principle of education? Not students need eight-hour days, that's a method. The first principle is learning requires repeated exposure to concepts, practice, applying them, and feedback. That's true whether it happens in a classroom, at home, online, or in an apprenticeship. Everything else, classroom structure, schedules, homework policies, those are methods built on that principle. Once you see the principle, you can question the methods. Step three, rebuild from first principles. Now you can ask, if I were solving this problem from scratch, ignoring what we've always done, what would I do? An education example. If learning requires exposure, practice, and feedback, does it require eight hours in a building? Maybe some students learn better in four hours, focused hours, then eight distracted ones. Maybe some concepts are better learned through video exposure, uh, real-world projects, uh, mentor review, than through lectures and textbooks. You can't see these options if you're locked into the assumption that school equals eight hours in a classroom. First principal's thinking unlocks options you couldn't see before. How first principal's thinking shows up in real decisions is a whole new frame of mind. Let me show you this in practice across different domains. A hiring decision. That's our first example. Assumption-based thinking. We need someone with five plus years experience in this specific role. Why? Because that's what the job description says. But why does the job description say that? First principles approach. What's the actual problem we're solving by hiring this person? Maybe it's we need someone who can execute X task with minimal supervision. Okay, that does require five years experience in that exact role. Is that what we're saying? Or does it require understanding of the underlying principles, ability to learn quickly and self-direction? What if someone has two years in this role but five years in a related role that required the same skill? What if someone has no direct experience but has demonstrated fast learning and self-direction in other contexts? You wouldn't even consider those candidates if you're stuck on the assumption five years required. But if you go to first principles, we need someone who can execute with minimal supervision. Suddenly, you have more options. Example two, budget decisions. Assumption-based thinking. We need to cut costs so we'll reduce the training budget. Why training? Because it's the easiest thing to cut without immediate consequences. First principles approach. What's the purpose of our organization? Let's say it's school. Prepare students for success in life. What enables that? Effective teachers. What creates effective teachers? Initial training and ongoing development. So cutting training budget undermines the first principles of what organizations exist to do. Maybe training is the last thing you should cut, not the first. You only see this if you go back to fundamentals. Example three, conflict resolution. I had two staff members at my school who couldn't work together. Constant tension, affecting students. Assumption-based thinking, these two people just don't like each other, we need to keep them separated. First principle's approach, why do conflicts between adults exist? First principle, conflict occurs when people have incompatible goals or unmet needs. So what are their actual goals? Staff A wants structured, quiet classroom environment. Staff B wants collaborative discussion-based learning. Their classrooms are next to each other. B, staff member discussions are loud. Staff member A feels disrespected, and staff B feels policed. Conflict isn't about personalities. It's about incompatible environment, needs, and adjacent spaces. Solution. Move one of them to a different part of the building. Problem solved. I only saw that solution when I stopped assuming personality conflict and went to first principles and compatible needs. So here are some common traps that prevent first principles thinking. Trap one, we've always done it this way. This is the enemy of first principles thinking. We've always done it this way. It's not a principle, it's a habit. Counter with why did we start doing it this way? What problem were we solving? Does that problem still exist? Trap two, industry best practices. Just because everyone in your industry does something doesn't mean it's optimal. Maybe everyone's copying each other. Maybe the practice made sense 20 years ago, but not now. Maybe it's optimized for a different context than yours. Counter with what outcome is this practice trying to achieve? Is there a better way to achieve that outcome? Trap 3. The expert said so. Experts are valuable, but experts can also be trapped in assumptions. An expert in how things are currently done might not be an expert in how things could be done differently. Counter with what first principles and this recommendation based on? Can I verify the principles myself? Trap four. It's too complicated to change. Complexity is often a sign of accumulated assumptions. When you strip things down to first principles, they often become simpler, more not more complex. Excuse me. Counter with what would this look like if it were simple? How to practice first principles thinking. So we moved on from the traps and now we're going to do some exercises. So exercise one, the five whys. Pick any policy, process, or practice in your organization. Ask why five times. Example, why do we have this meeting every week to keep everyone aligned? Why do we need to keep everyone aligned so we don't duplicate work or miss important information? Why would we duplicate work or miss information? Because people don't know what others are working on. Why don't they know? Because we don't have a shared system for tracking projects. Why don't we have that system? Because we never built one. So here's the insight. Maybe we don't need a weekly meeting. Maybe we need a shared project tracker. The meeting was solving the wrong problem. Exercise two. Assume you're starting from scratch. Ask, if I were building this from zero today with everything I know now, would I build it this way? The answer is no, we found an assumption worth questioning. Exercise three, question your constraints. Most constraints aren't real, they're assumed. We can't do that because of budget. Is budget the actual constraint or is it prioritization? Could we fund this by cutting something else? We can't do that because of regulations. What specifically does the regulation say? Are we interpreting it correctly? Is there a compliant way to achieve the same outcome? We can't do that because of time. Time for what? What would we have to stop doing to make time? Is that trade-off worth it? Most of the time we can't means we've assumed we can't. So here's some real examples, and I'll say with school discipline systems. When I became an executive director, we had a traditional discipline system. Assumption when students break the rules, they need consequences to learn. Method, warnings, detention, suspension, expulsion. But we had high suspension rates, and suspending students weren't improving. They were just getting further behind academically and more disconnected from school. I went to first principles. What's the purpose of discipline? Not punishment. Helping students develop self-regulation and make better choices. What causes misbehavior? First principle, behavior is communication. When a student can't get their needs met appropriately, they meet them inappropriately. So what needs aren't being met? For some students, connections, they feel invisible. For some competence, they feel stupid. For some autonomy, they feel controlled. For some safety, home is chaotic, school feels unpredictable. Traditional discipline doesn't address any of those needs. So we rebuilt from first principle. A new approach is restorative conversations instead of just consequences, mentorship for students who need connection, academic support for students who feel incompetent, voice and choice in assignments for students who need autonomy, and predictable routines for students who need safety. Suspensions significantly dropped in one year. Not because we got softer, because we stopped solving the wrong problem. We only found that solution by questioning the assumption that discipline equals punishment. So now it's your turn. Apply first principles this week. Pick one problem you're facing right now. You can write it down if you want. And ask, what am I assuming is true about this problem? What's the fundamental principle underneath? And I gave you those strategies earlier and trying to find it. If I were solving this from scratch, ignoring what we've always done, what would I do? And you'd be surprised what you discover. If you want to go deeper on first principles thinking, if you want frameworks for identifying hidden assumptions and rebuilding from fundamentals, I write about this every week in my Substack. You'll get real problems I'm solving with first principles approach, how to diagnose when you're reasoning by analogy versus first principles, some case studies regarding finance, education, uh, and leadership, as well as my reflections. And for$10 a month, you get some behind-the-scenes podcasts, some extra bonus episodes that that are very raw, uh sometimes may not even be safe for children because I am passionate about certain subjects that I try to restrain myself in in this space. And uh hopefully you'll pick up and learn more uh from it. You'll get a bunch of resources free if you just sign up, but for the$10, you do get a ton of bonuses as well. And this really helps if you like, share, and subscribe. I don't say this often, but uh this really does help out the podcast as well. Next week, everything affects everything. We're talking about systems thinking, how to see the ripple effects of your decisions, how second order and third order consequences shape outcomes, and why solving one problem often creates three new ones, and how to avoid that. Thanks for thinking with me. I'm Mike Aponte, also known as M.A. Aponte, and this is Thinking to Think.